[WILMINGTON] SandRidge Energy Inc and Breitburn Energy Partners LP filed for bankruptcy protection on Monday, the latest in a surge of Chapter 11 filings among US energy producers.
The biggest US energy price crash in a generation has now pushed more than 60 North American oil and gas producers to seek protection from creditors since early 2015, regulatory filings show.
As of March 31, SandRidge estimated it had total assets of US$7 billion and total debt of US$4 billion, and Breitburn listed assets of US$4.7 billion and liabilities of US$3.4 billion.
In the past three weeks, producers with about US$25 billion in debt have filed for US bankruptcy protection as increasingly larger oil-and-gas companies have succumbed to weak energy prices.
Small oil and gas producers have largely exhausted funding alternatives after issuing more equity and debt and shedding assets over the last two years to stay afloat.
SandRidge reached a pre-packaged bankruptcy pact with lenders. It has agreed on a reserve-based lending facility and a swap of about US$3.7 billion of other funded debt for equity.
The Oklahoma City-based company said it expected to fund its operations and capital programs until it emerges from Chapter 11, without the need for debtor-in-possession financing or other additional capital.
SandRidge, which produces oil and gas from shale formations in Oklahoma and Kansas, was founded in 2006 by Tom Ward, who also helped start natural gas company Chesapeake Energy Corp. SandRidge's board ousted Ward, a pioneer of the US fracking boom, as chief executive officer in June 2013 after a fight with activist shareholders.
Breitburn said it secured US$75 million in debtor-in-possession financing that, with cash on hand and from operations, would fund its operations during the bankruptcy process.
"Recent asset sales have been terrible and that's why you're seeing this wave of restructuring of debt rather than sales," said Deborah Williamson, a Dykema restructuring attorney in San Antonio.
"Creditors seem to be leaning toward a restructuring process that exchanges debt for new equity ownership and waiting out a recovery in oil prices."
Few struggling energy companies have been able to find buyers, although there was a rare exception on Monday as Range Resources Corp said it will buy fellow natural gas producer Memorial Resource Development Corp for about US$3.3 billion in stock.
Recent bankruptcy filings include Linn Energy LLC, Penn Virginia Corp, Chaparral Energy Inc, Midstates Petroleum Co Inc and Ultra Petroleum Corp.
Although oil prices hit a six-month high on Monday, stocks of financially distressed energy producers were lower.
Shares of Exco Resources Inc were down sharply for a second day after it said on Friday it would evaluate alternatives, including bankruptcy.
Canadian oil and gas producer Penn West Petroleum Ltd on Monday raised doubts about its ability to continue, sending its stock down 22 per cent.
Shares of Stone Energy Corp and Warren Resources Inc were both down more than 4 per cent.
Debt-laden Chesapeake, the second-largest US natural gas producer, said last week it would issue 4 per cent of its outstanding shares in exchange for notes.